Angel investors seek positive impact, warns of startup overvaluations

A recent survey has highlighted the evolving motivations of angel investors, indicating they are increasingly driven by the potential for positive impact. Financial fundamentals remain significant; however, with over-valuations named as the most common startup mistake.

The survey, conducted by the Angel Investment Network (AIN), sampled investors from its global platform to gauge their mindsets in 2024. The results suggest new trends in investor motivations and startup pitfalls that both commercial entities and investment hopefuls should note.

A key revelation from the survey was that a majority of investors were inclined towards a limited portfolio, with half of the investors having invested in 10 or fewer businesses. 28% had invested in under 5, and 30% had invested in 6-10 businesses. Interestingly, for some investors, the motivation is not solely about financial gain but is about making a positive change and leaving a lasting imprint on the world.

Startups looking to attract investors should note that successful founders were seen as having a clear value proposition (77%), showcasing passion and commitment (57%), maintaining strong values and mission (57%), and demonstrating strong leadership (46%).

Conversely, the most common mistakes made by startups during the fundraising process were overvaluating their companies (31%) and conducting inadequate market research (18%).

Furthermore, inexperienced teams were a significant red flag for investors, indicated by an overwhelming 63% in the poll. Close behind were startups with no clear path to profitability (62%), no proven business model (46%), and disorderly finances (44%). Investors also showed a preference for regular contact with startup founders, preferring monthly reports or communication (53%).

These findings are of significant interest to startups in current times, as Mike Lebus, Co-Founder of Angel Investment Network emphasised, "With a markedly different fundraising climate in 2024, it is crucial for startups to understand the motivations of angel investors who can provide a lifeline of early-stage funding. Our survey shows investors today are driven not just by financial gain, but by the potential to influence positive change and leave a lasting impact."

He added, "Investors are looking to support founders who demonstrate clear value propositions, unwavering passion, and strong leadership. Avoiding common pitfalls like overvaluation and prioritising effective communication are essential for startups navigating today's investment landscape."

Launched by childhood friends James Badgett and Mike Lebus, Angel Investment Network (AIN) is an online platform connecting startups with a global network of angel investors. With 40 networks extending to 90 different countries and nearly 2 million users, it is the largest angel investment community in the world. Its mission remains to help as many entrepreneurs as possible connect with great investors and realise their ambitions.